Aetna Announces Transaction with Vitality Re IV

January 23, 2013 05:08 PM Eastern Standard Time

HARTFORD, Conn.--(BUSINESS WIRE)--Aetna (NYSE: AET)
today announced that it has entered into a four-year reinsurance
arrangement with Vitality Re IV Limited as part of its long-term capital
management strategy. The arrangement allows Aetna to reduce its required
capital and provides $150 million of collateralized excess of loss
reinsurance coverage on a portion of Aetna’s group commercial health
insurance business.1 Vitality Re IV is a newly formed
insurance company which issued health insurance-linked notes in a
private offering in connection with this transaction.

About AetnaAetna is one of the nation's leading diversified
health care benefits companies, serving approximately 37.3 million
people with information and resources to help them make better informed
decisions about their health care. Aetna offers a broad range of
traditional, voluntary and consumer-directed health insurance products
and related services, including medical, pharmacy, dental, behavioral
health, group life and disability plans, and medical management
capabilities, Medicaid health care management services and health
information technology services. Our customers include employer groups,
individuals, college students, part-time and hourly workers, health
plans, health care providers, governmental units, government-sponsored
plans, labor groups and expatriates. For more information, see www.aetna.com.

1 Amounts payable under the reinsurance arrangement are based
on the annual medical benefit ratio (“MBR”) of a portion of Aetna Life
Insurance Company’s group commercial PPO, POS and indemnity business
compared to a threshold attachment point specified in the reinsurance
arrangement. The principal amount of the Vitality Re IV notes, which are
non-recourse to Aetna, and the coverage available under the reinsurance
arrangement will be reduced by any payments to Aetna under the
reinsurance arrangement. Aetna will be entitled to begin to receive
payments from Vitality Re IV under the reinsurance arrangement if the
MBR of the covered business for calendar year 2013 reaches an initial
attachment point of 96%. The full $150 million of coverage would be paid
to Aetna if the MBR of the covered business reaches an initial
exhaustion point of 116% for calendar year 2013. The attachment and
exhaustion points will be reset annually for 2014, 2015 and 2016 to
maintain modeled probabilities of attachment and expected loss on the
Vitality Re IV notes equal to the initial modeled probabilities of
attachment and expected loss.